Mastering Orderflow: How To Use SMT

Summary

This lecture explores the concept of SMT (Smart Money Time) in orderflow trading, clarifying its role as a timing tool rather than a standalone trading signal. The speaker breaks down two key SMT types: Time Cycle SMT and Previous Day (PD) Ray SMT, emphasizing the importance of displacement confirmation before acting on SMT signals. Through examples using NQ and ES markets, the video demonstrates how to combine SMT with lower timeframe analysis, imbalances, and previous daily highs/lows to frame high-probability trade setups. The lecture highlights that SMT identifies potential short-term retracements and should be integrated with other tools for reliable trade execution.

Takeaways

• 😀 SMT stands for Smart Money Time, not Smart Money Technique, and is an important concept for traders to understand in order to improve decision-making.
• 😀 Two main SMT variants are discussed: Time Cycle SMT and PD Ray SMT. Both are essential for identifying market opportunities.
• 😀 Time Cycle SMT looks at larger cycles in the market, not just 30- or 90-minute intervals. It’s based on the fractal nature of price movement.
• 😀 The example of the January low illustrates how SMT can help spot price reversals or continuations, but it is not an automatic signal for reversal.
• 😀 Displacement is critical after SMT formation. Traders should look for a strong candle closure, imbalance formation, or a large candle to confirm the SMT's validity.
• 😀 SMT does not guarantee a complete market reversal; it could indicate a short-term retracement or consolidation.
• 😀 PD Ray SMT focuses on the relationship between correlated markets, where one market may fill an imbalance while the other doesn't. This provides trading insight without requiring both markets to do the same thing.
• 😀 Time Cycle SMT can help frame trade setups by identifying major highs and lows across different time frames, such as daily or hourly.
• 😀 The importance of waiting for confirmation: Even after an SMT is formed, traders should wait for additional signs of rejection or displacement before taking a position.
• 😀 Combining SMT with other tools, such as Market Maker models and previous cycle highs/lows, enhances the reliability of trade setups, as demonstrated with NQ and ES.
• 😀 The final steps in using SMT in active trading involve marking key imbalances, waiting for retracements, and then entering positions with appropriate stop-losses based on the SMT candle.

Q & A

What does SMT stand for in the context of this lecture?

In this lecture, SMT is referred to as 'Smart Money Time,' although it is commonly known as 'Smart Money Technique.' The term emphasizes timing and alignment of market movements rather than just techniques.

What are the two main variants of SMT discussed?

The two main variants are Time Cycle SMT, which focuses on market cycles across different timeframes, and PD Ray SMT, which focuses on previous daily highs and lows to frame trade setups.

Why is displacement important after an SMT occurs?

Displacement confirms the validity of an SMT by showing a strong candle closure or imbalance formation, indicating that the market is likely to move in the expected direction rather than just reflecting a short-term fluctuation.

Can SMT alone be used to enter trades?

No, SMT should not be used alone to take trades. It needs to be combined with confirmations such as displacement, retracements, or alignment with other tools like market structure or order flow.

How does the fractal nature of price affect SMT analysis?

Price being fractal means that patterns repeat across different timeframes. This allows traders to use SMT on higher and lower timeframes to anticipate moves and align setups across multiple markets or cycles.

What is an example of using Time Cycle SMT with correlated markets?

An example is observing the January low where NQ does not take out the low while ES does. This indicates a short-term SMT signal, but the trader waits for displacement and confirmation before trading, showing that correlated markets can help frame setups even if they behave differently.

How can PD Ray SMT be applied to identify trade opportunities?

PD Ray SMT uses previous daily highs and lows to monitor potential market reversals or rejections. By observing if price fails or succeeds to surpass these levels, traders can frame setups on lower timeframes with better timing.

What is the role of lower timeframe SMT in trading setups?

Lower timeframe SMT helps refine entry points by showing more immediate market structure, such as retracements, imbalances, or smaller cycle rejections, allowing traders to enter with better precision and manage risk effectively.

How should stop-loss and target levels be determined when using SMT setups?

Stop-loss should generally be placed above the original SMT or SMD candle, while target levels can align with previous cycle lows or highs. This approach ensures that trades are framed around confirmed SMT signals and market structure.

What is the key takeaway for combining SMT across multiple timeframes?

The main takeaway is that combining higher and lower timeframe SMT, along with displacement confirmation, creates a robust trading setup. This multi-timeframe alignment increases the probability of successful trades while managing risk effectively.

Why might markets not fully mirror each other even if correlated when using SMT?

Correlated markets may have differences in liquidity, order flow, or imbalance fills, causing one market to take out a previous high or low while another does not. This is normal, and SMT analysis accounts for these variations by focusing on confirmations rather than absolute matching.